Goldcorp: Paying Dividends for 10 Years

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Includes: ABX, AU, GG, NEM
by: Efsinvestment

Incorporated in 1994, Goldcorp Inc. (NYSE:GG) became one of the world’s largest gold producers in just two decades. Goldcorp has 16 major operations and development projects in 6 countries across the Americas. The company operates several gold mines in Canada, Mexico, the United States and Argentina. Goldcorp expects to increase its gold production capacity by more than 50% over the next five years. According to Yahoo Finance, other closely related companies that compete with Goldcorp are Barrick Gold Corp. (NYSE:ABX), Anglo Gold (NYSE:AU) and Newmont Mining Corporation (NYSE:NEM). Based on the fundamentals derived from MSN Finance, the summary of 10 year income statements are as follows:

Income Statement

Revenue

Net Income

EPS

Dividends

2001

170.35

51.01

0.3

0.1

2002

185.19

65.64

0.36

0.08

2003

262.64

83.61

0.44

0.1

2004

191

57.3

0.3

0.2

2005

896.4

-134.9

-0.43

0.1

2006

1,649.40

-169.2

-0.39

0.1

2007

2,206.80

238.4

0.34

0.1

2008

2,419.60

1,241.20

1.73

0.1

2009

2,723.60

107.3

0.15

0.1

2010

3,799.80

1,215.20

1.65

0.2


2005 and 2006 were the worst years for Goldcorp, when both net income and EPS were significantly negative. However, thanks to increasing gold prices, the company entered into an explosive growth stage in 2007. The recovery has been strongest in 2008 and 2010. The highest net income was seen in 2008, at the peak of the global crises. After that, net income reduced again in 2009, but bounced back to 2008 levels in 2010. Thanks to the high profitability, Goldcorp was able to pay $0.2 dividends per share in 2010.

Dividend Policy: Regardless of the profits, Goldcorp managed to pay regular dividends for the last ten years. Between 2005 and 2009 the company paid $0.1 per share. However, in last year, the management doubled the dividends to $0.2 per share. Let’s look at the balance sheet:

Balance Sheet

Year

Current Assets

Current Liabilities

Long Term Debt

2001

226.41

68.85

0.00

2002

457.75

108.83

0.00

2003

638.52

130.78

0.00

2004

701.52

123.67

0.00

2005

4066.00

1092.20

0.00

2006

17965.90

5490.90

790.00

2007

18952.20

5973.60

1036.30

2008

19001.50

4042.40

5.30

2009

20948.70

5455.50

719.00

2010

28809.10

8614.90

747.10



In last ten years, company’s current assets increased by more than 100-fold; from $226 million in 2001 to $28.8 billion in 2010. The largest gain was in 2006; the current assets jumped to $18 billion from $5 billion in 2006. Current liabilities also moved in parallel to current assets, but the magnitude of change was much lower. In 2008, current liabilities were slashed to only $4 billion. Goldcorp does not have much long-term liabilities. In fact, there was no long term debt until 2006. The highest long term debt the company had was in 2007.

Avg P/E

Net Profit Margin (%)

2001

15,60

29,09

2002

26,70

35,40

2003

29,00

31,08

2004

44,60

30,00

2005

-38,60

-15,00

2006

-71,80

-10,30

2007

81,70

10,08

2008

20,10

51,30

2009

243,50

3,09

2010

25,50

32,00

Goldcorp’s average P/E ratio and net profit margin shows a lot of volatility, especially after 2004. Both were negative in 2005 and 2006. The company survived the worst losses in these years. The profit margin was -15%, and -10% in 2005 and 2006, respectively. 2009 was also challenging year with P/E ratio of 243.5 and a profit margin of only 3.09%. The golden years were 2008 and 2010, where net profit margins were 51.3% and 32%, respectively.

Competitor Analysis

GG

AU

ABX

NEM

Market Cap:

38.17B

17.26B

49.78B

25.48B

Employees:

N/A

N/A

N/A

15.5

Qtrly Rev Growth (yoy):

69.50%

14.90%

24.90%

1.20%

Revenue (ttm):

3.80B

5.69B

10.92B

9.54B

Gross Margin (ttm):

61.09%

33.59%

60.12%

62.80%

EBITDA (ttm):

2.03B

1.40B

5.86B

5.18B

Operating Margin (ttm):

37.05%

11.52%

42.69%

43.74%

Net Income (ttm):

1.39B

93.40M

3.15B

2.30B

EPS (ttm):

2.13

0.25

3.28

4.55

P/E (ttm):

22.41

178.76

15.19

11.34

PEG (5 yr expected):

0.49

0.16

6.19

15.00

P/S (ttm):

9.74

2.98

4.43

2.63

Gross margin of Goldcorp in 2010 was 61.09%, which is almost the same as Barrick Gold Corp. (ABX), and Newmont Mining Corporation (NEM). The operating margin is 37.05% which is much higher than that of Anglo Gold (AU). The 5 year expected PEG ratio is 0.49, which shows that analysts have higher expectations about the company’s profitability. The quarterly revenue growth rate of Goldcorp was fabulous. The company was able to increase its quarterly earnings by 61.09%.

The outstanding performance of Goldcorp in last decade shows that the company has a masterful management team. If the trend goes on, a relatively tiny mining company is on its way to becoming a global gold titan. However, note that the future success of Goldcorp is highly correlated with future gold prices. If things go south for gold miners, Goldcorp might start consuming its asset base soon.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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